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Click on any letter below to browse our list of financial terms or enter key words below to focus your search.
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| Terms |
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| Definitions |
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Hardship withdrawal A hardship withdrawal occurs when you are allowed to take out some or all of your 401(k) money to meet certain financial needs. You qualify by meeting the conditions your plan imposes, which typically ask you demonstrate the urgency of the situation and your need for the money.
Among the allowances the IRS makes for hardship withdrawals are purchasing your primary house, covering out-of-pocket medical expenses for you or a dependent, or paying college tuition for you or a dependent.
However, if you're younger than 59 1/2, you must pay a 10% penalty plus income tax on the amount you withdraw, and you may not be able to contribute to the plan again for a year or more. |
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Hedge fund Hedge funds are private investment partnerships open to
institutions and wealthy individual investors. These funds pursue
returns through a number of alternative investment strategies,
including hedging against market downturns by holding both long and
short positions, investing in derivatives, using arbitrage, and
speculating on mergers and acquisitions.
Some hedge funds use
leverage, which means investing borrowed money, to boost returns.
Because of the substantial risks associated with hedge funds,
securities laws limit participation to individuals with incomes of at
least $200,000 a year ($300,000 for couples) or those who have a net
worth of at least $1 million. |
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Hedger Hedgers in the futures market try to offset potential price
changes in the spot market by buying or selling a futures contract.
For example, a cereal manufacturer may want to hedge against rising
wheat prices by buying a futures contract that promises delivery of
September wheat at a specified price.
If, in August, the crop is
destroyed, and the spot price increases, the manufacturer can take
delivery of the wheat at the contract price, which will probably be
lower than the market price. Or the manufacturer can trade the
contract for more than the purchase price and use the extra cash to
offset the higher spot price of wheat. |
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Highly compensated employees Highly compensated employees are people who earned more than the ceiling the government establishes working for their employer. In 2002, that amount is $85,000.
The percentage of earnings that highly compensated employees may contribute to their 401(k) plan is determined by the average percentage of earnings contributed by all lower-paid participants in the plan.
If lower-paid employees contribute an average 2% or less, higher-paid employees may contribute two times the percent. If the average is 3% to 8%, higher-paid employees may contribute two percentage points more. And if the average is 8% or higher, the maximum is 1.25 times the percent. |
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